California trust administration (typically after death) is more involved than a lot of people realize. Yes, a properly funded California living trust avoids probate. That’s totally true. However, many trusts are not properly funded before death. Moreover, even for trusts that are properly funded before death there are a number of issues that the trustee needs to be aware of. Today I will talk about 3 of these issues:
1) Putting everybody on notice – It’s very easy to send out the California Probate Code 10161.7 notice and it’s MANDATORY by law. I have pasted the entire code section below but it starts by saying, “ (a) A trustee shall serve a notification by the trustee….” Notice the word is SHALL and not MAY. That’s a big distinction as most trust administrative provisions are “may” rather than “shall.” However, this one is SHALL and thus a trustee who takes over a trust after death SHALL send out this notice.
2) Creditors Notice – It’s a good idea to publish in a newspaper of general circulation in the community where the decedent lived and open a probate Court file to receive any creditor claims that are filed. Additionally you should send notice of trust administration to all known creditors and the California Department of Health Services. Failure to put the right creditors on notice can make the trustee personally liable for those creditors. Let me repeat, PERSONALLY LIABLE!
3) Taxes – Death and taxes, right!? Well, the first one is done and that’s why you are dealing with a trust administration. Now you have to deal with the second one! Though very few people have to worry about the federal “estate tax” there are income taxes, capital gains tax, and property taxes to worry about. Failure to pay the right taxes and file the right forms can make the trustee personally liable for those taxes. Let me repeat, PERSONALLY LIABLE!
This is just three issues that come up in a trust administration. If you are the trustee hire good counsel because this area of law is loaded with mine fields!
California Probate Code 16061.7.
(a) A trustee shall serve a notification by the trustee as
described in this section in the following events:
(1) When a revocable trust or any portion thereof becomes
irrevocable because of the death of one or more of the settlors of
the trust, or because, by the express terms of the trust, the trust
becomes irrevocable within one year of the death of a settlor because
of a contingency related to the death of one or more of the settlors
of the trust.
(2) Whenever there is a change of trustee of an irrevocable trust.
(3) Whenever a power of appointment retained by a settlor is
effective or lapses upon death of the settlor with respect to an
inter vivos trust which was, or was purported to be, irrevocable upon
its creation. This paragraph shall not apply to a charitable
remainder trust. For purposes of this paragraph, “charitable
remainder trust” means a charitable remainder annuity trust or
charitable remainder unitrust as defined in Section 664(d) of the
Internal Revenue Code.
(4) The duty to serve the notification by the trustee pursuant to
this subdivision is the duty of the continuing or successor trustee,
and any one cotrustee may serve the notification.
(b) The notification by the trustee required by subdivision (a)
shall be served on each of the following:
(1) Each beneficiary of the irrevocable trust or irrevocable
portion of the trust, subject to the limitations of Section 15804.
(2) Each heir of the deceased settlor, if the event that requires
notification is the death of a settlor or irrevocability within one
year of the death of the settlor of the trust by the express terms of
the trust because of a contingency related to the death of a
(3) If the trust is a charitable trust subject to the supervision
of the Attorney General, to the Attorney General.
(c) A trustee shall, for purposes of this section, rely upon any
final judicial determination of heirship, known to the trustee, but
the trustee shall have discretion to make a good faith determination
by any reasonable means of the heirs of a deceased settlor in the
absence of a final judicial determination of heirship known to the
(d) The trustee need not provide a copy of the notification by
trustee to any beneficiary or heir (1) known to the trustee but who
cannot be located by the trustee after reasonable diligence or (2)
unknown to the trustee.
(e) The notification by trustee shall be served by mail to the
last known address, pursuant to Section 1215, or by personal
(f) The notification by trustee shall be served not later than 60
days following the occurrence of the event requiring service of the
notification by trustee, or 60 days after the trustee became aware of
the existence of a person entitled to receive notification by
trustee, if that person was not known to the trustee on the
occurrence of the event requiring service of the notification. If
there is a vacancy in the office of the trustee on the date of the
occurrence of the event requiring service of the notification by
trustee, or if that event causes a vacancy, then the 60-day period
for service of the notification by trustee commences on the date the
new trustee commences to serve as trustee.
(g) The notification by trustee shall contain the following
(1) The identity of the settlor or settlors of the trust and the
date of execution of the trust instrument.
(2) The name, mailing address and telephone number of each trustee
of the trust.
(3) The address of the physical location where the principal place
of administration of the trust is located, pursuant to Section
(4) Any additional information that may be expressly required by
the terms of the trust instrument.
(5) A notification that the recipient is entitled, upon reasonable
request to the trustee, to receive from the trustee a true and
complete copy of the terms of the trust.
(h) If the notification by the trustee is served because a
revocable trust or any portion of it has become irrevocable because
of the death of one or more settlors of the trust, or because, by the
express terms of the trust, the trust becomes irrevocable within one
year of the death of a settlor because of a contingency related to
the death of one or more of the settlors of the trust, the
notification by the trustee shall also include a warning, set out in
a separate paragraph in not less than 10-point boldface type, or a
reasonable equivalent thereof, that states as follows:
“You may not bring an action to contest the trust more than 120
days from the date this notification by the trustee is served upon
you or 60 days from the date on which a copy of the terms of the
trust is mailed or personally delivered to you during that 120-day
period, whichever is later.”
(i) Any waiver by a settlor of the requirement of serving the
notification by trustee required by this section is against public
policy and shall be void.
(j) A trustee may serve a notification by trustee in the form
required by this section on any person in addition to those on whom
the notification by trustee is required to be served. A trustee is
not liable to any person for serving or for not serving the notice on
any person in addition to those on whom the notice is required to be
served. A trustee is not required to serve a notification by trustee
if the event that otherwise requires service of the notification by
trustee occurs before January 1, 1998.